Go First case: 'Evident cannibalisation of aircraft', Delhi HC notes in order in plea by lessors

Go First, Delhi HC

The Delhi High Court, while permitting the lessors of grounded airline Go First to engage security to monitor their aircraft, has remarked that it was doing so as there is evident cannibalisation of the aircraft.

The High Court order said, "A review of the documents and photographs filed by the Petitioners/Lessors show the evident cannibalisation of the Aircraft."

Furthermore, the order noted that the court may have to reexamine whether the Resolution Professional (RP) has complied with the court's directions to preserve the value and integrity of the aircraft. Justice Tara Vitasta Ganju, who passed the order, noted that the lessors have made a case to pass additional directions to protect these highly valuable equipment during the pendency of the case.

According to the order, "It is also deemed necessary that the lessors be permitted to contract 24-hour security services for all the aircraft, to be provided at their expense."

Furthermore, the judgment holds that the RP has to supply all the documents pertaining to the aircraft's maintenance and airworthiness to the lessors to ensure that the lessors can undertake a meaningful inspection of the aircraft and other parts.

The High Court has directed RP to provide all the documents relating to the aircraft, the airframes, its engines, and other parts and components to the lessors in 14 days. However, the RP will continue to maintain the aircraft.
This order will apply to all 54 aircraft in Go First's possession.

What did the lessors contend?

The lessors of the airline had filed applications seeking permission to maintain their aircraft. They contended that the aircraft are not being maintained. DAE (SY 22) 13 Ireland alleged that the condition of the aircraft was deteriorating every time it inspected the planes.

DAE, which has leased two aircraft, alleged in its plea that RP was not giving it access to documents such as maintenance records, which were essential to determine if the planes were being maintained in an airworthy condition.
Other lessors such as BOC Aviation Ireland and ACG Aircraft Leasing, too, have also filed similar pleas. ACG Leasing has alleged that fan blades, escape slides and many critical parts were missing from at least two planes.
Another lessor has urged the court to direct Go First to replace "robbed" parts from its leased jets and allow it to appoint round-the-clock security to guard grounded aircraft.

RP's arguments

Appearing for the RP, lawyer Diwakar Maheshwari, questioned the conduct of the lessors for moving both the Delhi High Court as well as the National Company Law Tribunal (NCLT).

He further argued that while the single judge permitted the lessors to inspect and maintain, the division bench on July 12 modified it to permit the lessors only to inspect. According to Maheshwari, the lessors must approach the division bench to modify this order.

The current status of the case

The lessors filed writ petitions against the Director General of Civil Aviation (DGCA) seeking directions from the court to deregister the aircraft. The DGCA has, however, maintained that they cannot deregister the aircraft owing to the moratorium.

On July 5, the court permitted the lessors to inspect and carry out the maintenance work. A week later, a division bench modified the order, saying the leasing companies would only inspect the aircraft and the RP would take care of the maintenance.

However, on October 4, the Ministry of Corporate Affairs issued a notification exempting aviation-related documents from moratorium. Section 14 of the IBC deals with the power of adjudicating authority (NCLT) to issue a moratorium when admitting a company to the insolvency resolution process. Once a moratorium is imposed, activities such as the institution of suits, continuation of pending suits, execution of judgments, transferring/disposing of assets, and recovery or enforcement of security interest are prohibited.

As a result of this notification, a moratorium will not include agreements relating to aircraft, aircraft engines, airframes, and helicopters. This would mean that aircraft, engine, and helicopter leases and other agreements will not be bound by a moratorium.

The RP has taken time from the Delhi High Court to analyse the impact of this notification. The High Court is expected to take up this case for hearing on October 19.